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Mad Money

News/Business. (2013) New.

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01:00:00

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San Francisco, CA, USA

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Comcast Cable

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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704

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480

TOPIC FREQUENCY

Cramer 7, Us 5, Goldman Sachs 4, Europe 3, Groupon 2, Cnbc 2, California 2, New York 2, Ford 2, Jim Cramer 2, Jim 2, Facebook 1, Qdoba 1, Kuwait 1, New York City 1, Rio Tinto 1, Facebook Ipo 1, Massachusetts 1, Andmatters 1, Expected Bt 1,
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  CNBC    Mad Money    News/Business.  (2013) New.  

    February 13, 2013
    6:00 - 7:00pm EST  

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finance business that saw it. >> certainly an epic debate mentioned by bill ackman. time now for the final trade. let's go around the horn here. tim? >> longer term high volatility call. trq, a mongolian copper and ore play. half owned by rio tinto. getting better locally. >> karen? >> gnc. a name we haven't talked about much. earnings tomorrow. we are long. >> grasso? >> uri. united rentals. it turns out to be the ultimate inf infrastructure play. last night on the state of the union, we heard president obama talk about it. i don't know if there's going to be backing from both sides. this is the place you want to be. >> guy? >> hi there. we have a little time. all my efforts have been this warted to take you to qdoba, especially for valentine's day. >> i'm free right now. >> i decided to bring -- >> aw! >> did you eat half it? >> i got us a meat salad and a large drink, one straw so we could share. >> that's too big for new york
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city, that soda. >> this is sort of our valentine's day. i'm not here tomorrow to share it with you. >> i would love to take a swig of this. >> look, look! see that? >> now i know where your true affections lie! >> it's the other woman! it's the other woman! >> what is this? >> butter cup. >> a woman in every port, mel. >> and you ate half this, by the way. half is gone. >> happy valentine's out there. >> to everybody, a day in advance. >> a day early. >> which is the way to do it. >> don't go anywhere. "mad >> i'm jim cramer, welcome to my world. you need to get in the game. stearns are going to go out of business and he's nuts, they're nuts, they know nothing. i always like to say there is a bull market somewhere. "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money," welcome
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to cramerica. other people want to make friends, i'm trying to save you money. i'm teaching and coaching you. call me at 1-800-743-cnbc. of night i come out here and help you find high-quality companies with stocks that are worth owning, stocks that will reward you by going higher or paying you juicy dividends or maybe even both. but perhaps because of my four decades in the business, i sometimes leave too much unsaid. i take too much knowledge for granted. knowledge you need to know to be the best investor you can possibly be. we're taking time-out to impart some of the knowledge in a special show about the way stocks work and interrelate with the companies they stand for and represent, two different things. on "mad money," we analyze companies, trying to see what makes them tick what expectations they are supposed to be, the metrics. we don't trade those companies. we invest in their stocks and never forget the company and stock are not the same thing.
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i know. that might sound really obvious, the kind of thing you go without saying, but people constantly make the mistake of equating a company with its stock. and it's the kind of mistake that can absolutely wreck your portfolio. especially in volatile markets where many stocks trade off the big picture, macro roh data about the broader global economy, the fiscal cliff. budget compromise, something in europe. that's what's known as the macro. rather than what's known as the micro. meaning information about the actual companies behind the stocks. fact is, it's all too easy to assume a company and its stock are synonymous. a stock gets crushed, okay? and when assume there must be something wrong with the underlying company. why else would the stock be pounded? when a stock surges, we presume the company must be doing something right. but that's simply not ow the markets work. often shares of a company stock will have big moves up or down
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for reasons that have absolutely nothing to do with the underlying business it happens all the time and it doesn't mean the market is crazy or irrational. what is irrational is believing it will always be a straight line, a lockstep, between the performance of a company and the performance of its stock. why is that wrong? shouldn't stocks trade based on the changes and prospects of the underlying company? isn't that the way the market should work when it isn't broken? don't we spend lots of time analyzing companies, a free and fair way, showing them to figure out what makes some businesses better than others and teaching you to identify situation where is companies are improving. at least better than people think, right? better than expected bt. i'm always telling you the most important determine every of a higher stock price is increases from earnings. nothing correlate morn more with rising share price than estimate kriss. dividend boosts of decent magnitude. why not enough to steady companies and buy the stocks
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that look like they have the ability to grow earnings faster than expected or grow the dividend? we can't buy companies, unless you've got hundreds of millions of dollars to throw around, it's simply not an option. instead, we buy shares of stock in those companies. shares that trade on an open market. we have lots of buyers and lots of seller who's might have very different motivations from you, when you find a high-quality company with seemingly excellent prospects, you can't assume shares will gi g.er higher since you need to take the way the stock trades into. stock has its own method of training. like a dna for stock. don't get me wrong. over the long haul, the best way to pick stocks by identifying winning companies, ones that are growing faster than others expect and improving dramatically in actual performance. especially on day-to-day basis. they can trade wildly with little relation to what's happening with the company. those movements can be so con founding that you end up selling low, or buying high.
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or you give up entirely, and you know i think you need to stay in the game if you are going to augment that paycheck. save money for retirement, vacativ vacati vacation, tuition, necessities of life, all the things you want to have the money for. if you assume every move in the stock market makes sense, you will end up passing some incredible opportunities. >> all aboard! >> to buy merchandise that's been marked down for irrational reasons, meaning no reason whatsoever, and you will miss moments when you sell stocks that are run up too much courtesy of market mechanics rather than anything relates to the company underneath the stock in recent years, we've witnessed the rise of a ton of factors, and at least near term, over the long-term, they do tend to converge. that may be longer than kuwait. but over days, even weeks, months, you have all sorts of things this can make the stock of an improving company fall or
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deteriorating companies rise, many use exchange traded funds to get exposure to entire sectors, some allow them to buy or sell, giving them double or triple of the buying or selling back for the original buck. regardless of needless proliferation of ets and we can o trade in lockstep with each other. and the good in complete tab dem with the badding is and ultimately, the facts show out.. the house is in the neighborhood. and nobody wants a good house in a lousy neighborhood. but the influence of epss back noxious, pernicious even it makes the sector more important than it should be, have you high frequency traders who can actually really -- i have seen
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them hijack an entire market, causing massive across the board moves that make no sense in the fundamentals of the individual companies, especially moments of extreme volatility, new waives distort the stock picking beast. i hate it, and when times get tough for companies, they can get tougher for stocks, i spend a locality of time talking about foreselling, the idea that stocks can get slammed because financial institutions like hedge funds that own them are in trouble. they've borrowed too much money and need to raise cash in order to send some back to investors this happens of time hedge funds make the same bet. money manager who's bet heavily in europe and lost when the eurozone indebted eurozone crisis, they didn't just have to sell european assets. they are had to sell unrelated stocks too. especially if incest investors clamoring to get money back, and this is exactly what happened
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when we crashed in 2008 and 2009. most stocks went down to absurdly low levels and it happened again with mf global. they ran out of capital and then the reverse happened in 20126. those who bet in all stocks had their heads handed to them, when they put the foot down on their necks and stopped the back sliding financial institutions. it didn't party, look, if a bank was solvent, insolvent, they flew up together, most hedge funds have to make gbets for or against stocks when shots pile into a stock and get unexpected good news from a company, you get a short squeeze that propels the stocks to absurd heights. since short sellers have to buy to close out positions. remember, the market is -- the
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market which means it's dominated by supply and demand. not enough supply of a given stock or kind of stock to set that, you will see stocks rise beyond what it is expected to be based on fundamentals and too much supply relative to demand, they get hammered beyond what you think they might go to. we saw this with areas like chinese internet ipos. returns were staggering, but gains became smaller and smaller as we got more and more chinese dot-comes flooding the market. same thing as what happened with the end of our own dot-com boom before we saw so much insider selling, we saw shares upon shares, it could happen again, deluge, social media in 2011, 2012, a repeat of what happened in 2001, 2002. in the end, no chinese deal is
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worth participating in. demand well oversaturated. this is one of the reasons chinese ipos reached lowest levels in 2012 in a decade. an 80% decline from 2011, 90% decline from 2010. and the last buyers out of the chute, they were crushed by ways of insiders bailing, seemingly at any price imaginable, just like what happened in the country in 2001, 2002. super hot stocks became super cold. the public first fascinated and then turn turned on them with a vengeance as fundamentals were never really good to begin with bottom line, recognize what's happening with stocks doesn't always necessarily reflect what's going on with the underlying business and use that to your own advantage. a company in terrific shape sees stocks smashed for reasons unrelated to fundamentals that could be an amazing buying opportunity. sometimes it can take a long time for the action in a stock to sync up with the performance of the company it represents, a
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tiny piece of. that way you won't be frustrated with what you thought should happen, if you heard fabulous news and instead, wait until the market gets smart and rewards your stock with the moves that it deserves. larry in massachusetts. larry. >> caller: greetings, rabbi cramer, from boston, formerly pennsylvania, formerly north bergen, new jersey. >> what's up. >> caller: thank you for building the temple for financial wisdom and doing what mom felt was your highest and best calling and you are gracious to all of us. i'm an enthusiastic subscriber to action alert. you talk about buying in wide scale, could you go into detail about buying down a good stock with bad news, particularly what percentage drop in the stock price, versus catching a falling mine? >> this is a tough question. whether there is somewhat real money and somewhat in stay mad. what you got to do, look at the
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situation and say, look, i want to build a position that's 10% of my portfolio, what if i started buying $20 stock. bought some at 20, some at 15, some at 12, would i be larger than 10% of my portfolio? if that's the case, buy down in a pyramid. that's what i want. a pyramid buy. joel in new york. >> caller: how are you, dr. cramer? >> real good, doctor, rabbi, whole thing covers. what's going on? >> caller: joel from queensberg, new york. a big booyah to my wife gail, who handles all my trading. >> gail rocks. >> caller: what's meant by restricted stock and how does it affective de dividends and preferred? >> it means you literally have to get it to be free to trade there are ways you have to do it, with restrictions that the government puts on it. you don't have to worry about restricted stock. doesn't factor into the
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fundamentals of the company, which we really care about. >> don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to at madmoan@cnbc.com or call 1-800-743-c flnch bc. tomorrow, guest host jack welch on the economy, markets, and more, plus pepsico and general motors respond to earnings. first on "squawk box," tomorrow 6:00 a.m. eastern on cnbc. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display on the 2013 lexus gs.
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there's no going back. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves
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wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex.
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welcome back to tonight's special edition of "mad money," when i try to move stocks up, what really moves them and how they diverge from the companies they purport to represent. i talked about the need for investors to get familiar with how stocks trade. you need to know about the traders that drive stocks in different directions and watch short-term moves in stock prices, take advantage of them rather than pretending like so many pundits do, short-term gyrations are beneath their notice and will pollute gains.
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may we never be so self-important or arrogant to think that entry and exit points don't matter. they control the ability to outperform the market and make a lot of money. we care more about prices at the supermarket sometimes than we do the prices of stocks we buy. that's just plain wrong. so how do we square the idea that when you buy a stock, its price can become unglued from the underlying fundamentals of the company. with my insistence you do your homework? what's the point. keep track of the fundamentals, read quarterly conference calls and myriad research pieces, now readily available on the web to keep current. why bother? if stock prices are going to bounce and at the mercy of macro factors that companies can't control, sound familiar? or if they are held hostage by hedge fund that trade them, why the relentless focus of learning as much as you can about the underlying company. am i nuts?
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why? especially given that homework is the onerous and most polk folks, the least interesting part of the process? the fundamentals matter a whole lot and they are knowable. the reason we focus on fundamentals, just about anybody can do it, and the information is readily available, public, and on the web and in short, when you may think the homework is tedious and boring, it's easy to predict so much of what's out there that is simply unknowable, investors look for an edge, a leg up that provides them with an advantage. that will never change. not all advantages of the same scale, but by following my standard homework regimen, have an edge over most of the people who trade the stocks you follow. how on earth is that possible? yours involve looking at publicly available information. according to some economists and arm chair investors and a lot of gray beards critical of the show, it should be baked in to
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the stock. meaning the share price should reflect everything you know from the research already, but you know something? come on, you and i know that's not how the market really works. lots of people are lazy, money managers and technicians, look at the fundamentals and don't get down and dirty to the nitty gritty of the quarterly earnings conference if you keep up with the information you will know more about the stock that many professionals do. and if that's not an edge, i don't know what is. homework is about taking control of your own financial destiny. eliminating as much emotion as possible. that's what we're trying to do. get that out of equation. that's why i focus on the homework. i know it will get results. knotted just any results, the factual, objecttive kind, not the fiscal cliff that might be irrelevant to the stocks or federal reserve minutes. i mean, anything to your position. the homework won't always give you information, enough information to tell you which direction a stock will head, and won't protect you from the
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whims, yes, call them children in washington that play with the economy willy-nilly and affecting any number of rogue nations in europe. but it isn't an all or nothing proposition. familiarizing yourself with a company should ever be dismissed as less than useful. and i said at the top of the show, stocks trend to drift back in line with where they deserve to delayetrade. in addition to knowing a lot of pertinent things, you can assume your stock will end up with a certain price range, really. if you wait long enough it will happen, happens a big percentage of the time and if you keep up with the homework, a good, clean way of deciding whether or not to cut your losses in a stock that isn't working, which is an incredibly valuable tool when you are trying to claw your way because your stock went down because of a typical market sell-off. you need to know whether you should perhaps be a buyer, if
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nothing is going wrong with the company. you know whether opportunity is knocking or your head is about to be knocked to the canvas. on the other hand, it will give you the conviction to stay with a good stock hammered by the market forred wrong reasons, you will know why you are buying or selling something. isn't that good? won't be beholden to anyone but yourself. that's why i teach every night. now, the better are you at av d avoiding stocks with a risk/reward that's good for bad or bad to good, the better position to take more calculated, intelligent risks, more aggressive with your investments, these skills are useful no matter what, but paramount from needing to protect your capital and needing to risk. that's what the fundamental research and investing is even though these skills are handy, they aren't compel asking minpe not give you the total picture and the boredom factor. think about whaf auto done out
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here. years trying to make it more accessible and interesting, even intriguing if not entertaining. no sin, given that so many focus on scaring you out of your shoes, and i have shown a willingness to get investors engaged, keep them engaged, especially on this show. i've filmed while wearing a hazmat suit to compare hasbro to mattel. taken a nope on a cozy bed of cheerio's, driven on set on my law mower to look at john deere. i can't even put a dollar amount on the gizmos that i have wrecked. and i have even looked at one-hit wonders and rappers like biggie smalls. i have ship chiped a tooth not to tell you to touch a stock of crispy creme. i ate pepperoni dog food and
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threw up on the set all over my wing tips. i'm not kwerned that ma ee ee e miss the homework because we have ways of making you motivated. bottom line, it's important for you to know why you are doing the work. what's the point? a war to build conviction in your stocks, get an edge. when it's totally legal, volatile or calm with markets. so many panic at the sight of the president coming to the podium. it might be a buying opportunity and not just a selling one like all of those panicers around you. ed in california. ed. >> booyah, ed from northern california. >> thank you for calling. >> jim, in your last book, and on your show, you have mentioned on numerous occasions to buy deep into the money calls. >> yes. >> if my memory serves me correctly. you love buying these calls about three to four months out.
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my question is this. with the volatility due to the market with several ongoing events okay to buy these calls out? >> you go deep in the money, tend not to have a lot of premium, that's fine. remember why i do this, stock replacement, a less risky family. i'm trying to cut off the down side of a google, apple, some multihundred dollar stock and that's why i recommend these. jazack in illinois. >> caller: hey, jim, with the uncertainty with the economy, you know, the fiscal cliff, debt ceiling, all of this, i'm looking for an investment that etf based and is gold, but based on the physical. i think -- i'm really into like, you know, physical investing and not just straightup normal etfs. >> well if that's the case, you got to be careful. i -- the closest we have is the gld and i'm not backing away from that. i think that is -- i've talked
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to a lot of gold dealers, some are nervous, some aren't. i think gld does fine. always telling you too do your homework. why? it's a way to have conviction. leave the panic to everybody else, and i'll try to make you even more money. >> jim cramer, one of my heroes. >> i look forward to your show every week night. >> thank you so much for helping beginning investors like me. >> when you talk about the market, i just believe that you're spot on. >> i love it. thank you so much. every night we watch you. i have learned and earned.
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we talked about the way stocks diverged from companies, let me tell you about a tool that can help you make money quickly but carries a certain amount of risk and can be trouble if you don't know what you're doing. i'm talking about investing in initial public offerings, ipos, get more questions about this than anything. it's possible to ignore the opportunities that have come out the last couple of years. some fizzle from the opening bell. these are led by technology and in some cases social media names, which have been met with exceptional hype. hype doesn't begin to describe the buzz, almost hysteria, about the facebook ipo. that was super hyped. maybe hyper hyped. they are sexy, talked about written, endlessly, but hardly
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ever told what to actually do with them. i'm going to teach you the basics right now, because when you know how to tell the difference between an about to be public company that will soar and one that will go down in flames, you have the potential to lure in serious profit. when you get one right, gains of 20% to 30%. the stocks are out of whack with the underlying company. the instantaneous nature of the profits make them attractive. but they can get in the way of better judgment and cause to you invest in initial public offerings that end up stinking up the joint. as helpful as profits can be, don't let buyers believe that the ipo is a great way to make money. but your broken can always finagle you some shares. wrong, wrong, wrong. some initial public offerings aren't worth investing in. they will try to slip in some clunkers much. now partially because new and public companies tends to be all
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over the map, especially on the first day of trading. there ist much information about the newly public stocks and a tendency to assume that success or failure of a given ipo is a question of luck. you can figure out which ipos to write off as uninvestable and which ones deserve to be bought. separating the wheat from the chaff isn't about luck, it's about analysis, the kind of homework that professional money managers do all the time and i advocate tirelessly and endlessly on the show. i have a gripes, because every day i would analyze stocks the same way at my hedge fund, and i made a boat load for myself and my clients by investing in ipos and i want you to know exactly how i did it. inside basis points you need to know about ipos, the investment banks have their own agenda, one i believe that's about bringing people -- regular people, retail investors, you, back into the game, as it is about helping their clients raise money in the equity markets. one things i learned on many
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years on wall street, both hawking stocks and both managing money for myself and rich people in my hedge fund and in the charitable trust, and when the market turns south and people start pulling out altogether, brokers like to throw investors some easy wins, lay-up ipos that are seemingly underpriced to pop when the shares start trading why would they underprice the deal and short change banking clients? just as important to brokens that other clients, the one that trades commissions, keep being interested in the market. the gains from a sweet underpriced ipo and the small float that boost shares is a great way to feel good about stocks in general. they want to entice you into a stock market. for the anatomy of ipos to fit that pattern, look at linkedin and groupon. they grove 29% and 31%
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respectively on the first day of trading. there is no doubt that the issue was the artificial way they were priced. putting out very little stock, knowing that it would cause a big pop, because it was just a sliver of the whole -- of all the company, the float was small. creating a bubble all by itself, the broker knew stocks would be hot, in part because of valuation for the social media cohort and the hype among retail investors and if they offered a limit number of shares, and put it below the pricing evaluations, demand would be huge. the brokers tightly controlled supply and plus went into accounts that they believed would not flip the stock, doing this. buy, buy, buy, sell, sell, sell and gave enough to the large mutual funds that they would start and not finish the positions, but the mutual funds were coming to the secondary market the regular stock market and bid linkedin up to get the rest of the positions in. that's what happened. the trick to a successful ipo is
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rationing process, the stock to potential shareholders know how much the big shares need enough to have it linked in to affect the performance. they give them a percentage, sometimes a third, sometimes as much as a half of what they need to own a full position. a half a full position, say, and that forces the clients' hands to complete the size of the position in the open market. of course, they could flip the positions themselves, but the brokers have ways to monitor who takes the quick money and will not be allowed to get big allocations the next time around. you benefit because the syndicate desk almost always save stock for retailer in investors and they are likely to buy and hold onto a stock. i'm indifferent to whether you do either. i you want to make money. the only thing you shudder do is go into the aftermarket and buy stock of a hot deal. meaning after the market started trading up. if you don't get in on the deal, forget about it. i've got staggering statistics to show you are almost a sure
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loser if you buy a hot stock after it trades with a couple of stocks allowing it to make money after several months and most just gigantic losers that could destroy your nest egg. a lot of work on this linkedin. that thrown into. and long-term winner and groupon remains in the dog house as do some of the shooting stars of the bye gone era. and the odds favor losing, and remember you are in a much better position than that of a mutual fund, don't have to buy a lot of stock to be sure you have enough shares, you can pick and choose, providing you do enough business with a full service broker. in the aftermarket, wait until you get a reasonable price and performance details before you start coming in. like with facebook in the fall of 2012. when everyone feared there would be a ton of insider selling when the company got religion about going mobile, that was the moment to buy, not sell. the weakenest hans were gone and the knowledgeable people come
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into buy. same thing with raucus, the wi-fi company, after it broke the print, or the initial ipo price. ipos can be a great way to make money, but if you are not in the know, it he can be a treacherous path. remember, the big guys don't necessarily have you, the home gamer in mind. be aware and trust me, never buy in the aftermarket. for every winner there are ten losers, and please, please, please, don't be a sucker. stay with cramer.
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dealing with ipos can be difficult and dangerous, because the prospect of instant gains so
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enticing. >> that was easy. >> before it can cloud your better judgment. everybody who got in on the aborted facebook deal knows too well, you need a consistent method so you don't get torn to pieces by something you don't understand. a deal you can't fathom or make heads or tails of. so here is your primer on an nizing hot and cold and safer from more dangerous. the most important thing with the ipo isn't what the company does, it's the company's pedigree. what die mean by that? i care before who the executives are, who the investors are, and the first call with the managers can be irrelevant and strangely, it's the least important part of the pedigree equation. that's because so many of the best deals represent technology companies, including social media, and those companies revolve around an invention, and maybe just an al go rhythm. if you look at google's management, would you have
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avoided its ipo like the plague. who the heck were larry page and sergei brynn. a couple of twenty-something willedmen. the new kids on the block have improved themselves and proved them as new kids on the block. did you know anything about mark zuckerberg other than he wore a hoodie? who are the investors? a negative check, disqualifiers, negative more than a positive one. when look at the investors, i am concerned about you getting caught up on another kind of investment. one funded by private equity companies anxious to cash in on a better equity market. and equity firms have taken care of equity firms, they bought many servers and bought far too much of them. they need badly to offload these companies into the market to get
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them off the books, some of them will barely be profitable, some will simply be stinkers so they will try to entice you to pick up some so a hope of a rising tide could lift all of these boats, including these dogs. the private equity ipos cannot be trusted. and this brings up an important as pefkt ipos, recognize that because a company can be publicly traded doesn't mean it is a piece of junk. some would qualify as a traf esty, mockery, as a sham. some of the smaller social media falls into this category. they make companies disclose facts and financials as possible. so you can judge for yourself. sun li sunlight is the best disinfectant. they do so much business with the outfits, very hard to say no to. they get immense amount of money from private equity firms when
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they take a company private and more fees when the company is spunt off as a public equity firm, and you are thinking about large fees from the new fixed incomes, and i think that that is why the investment bankers bend over backward to favor the private equity firm rather than brokerage firms that are buying them. and the main investors in companies that are becoming public. we'll call it, it doesn't mean it says absolutely no. we'll call it a red flag and third, i always look at the brokerage houses bringing the deal. i want them to be along the lines of jpmorgan, goldman sachs. they have a reputation on theline and that makes them less likely to bring a clunker public. you can take this as a fairly good seal after previously for the enterprise. why am i telling you this? let me tell you a story. in the '80s, i personally helped
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to work with the financing of a young company started by some brilliant people out of m.i.t., called thinking machines. they had a computer that could calculate data faster than any other company in the world. when they decided to bring the company public, i was able to convince them to use goldman sachs as a deal manager. only one problem. i couldn't convince goldman sachs to put the name on the deal, despite the immense fees that an ipo brings to a firm. the analyst at the time that would have followed the company, pored over the financials and looked at the product and made a judgment that the company, while having short-term momentum, would not have any staying power. i was aghast. i stood to make a big six-figure ticket. that's when six figures meant something. this analyst simply wouldn't budge. reminding me this was goldman
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sachs, not some slop firm that will put its name on any company because it was hot. sure enough, we passed and within a couple of years, the company failed. a victim of better technology and poor management. that's why the brokerage pedigree hearsay, andmatters. it doesn't mean every ipo bought by goldman will be a success, but avoiding smaller outfits does help weed out some of the failures and in the heyday of social media, just like with the dot-comes at the turn of the century, every firm good, bad, got caught up. never any assurances that a goldman or anybody else will do the job, checking names behind the deal remains a good ipo. only after i've gone through the three-step vetting process would i consider what the company goes or what it makes or how it's done in the past, in part because it's so difficult to judge those issues and i would rather use the quick filter i
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went through above before i crack the books on the company. something i will teach to you do right after the break. stay with cramer. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. ens. answers.
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we've reached the final step. how do actually analyze the company that's coming public. here you have to assess what the company makes, ask if it's profitable and most important, thinking about hanging on to the stock after the deal, you need to know how big its end markets are. that's the key thing. this isn't all that different from analyzing any other stock, except you have less information to go on, less track record. most of it coming from the prospe prospectus. it can be easy to figure out if
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it's a brand or has a product. but it can be more difficult to figure out what the company makes if it involves a sophisticated product, especially if it's technology. semiconductor miniaturization that can be some of the toughest ones. do you like it? that isn't the only question. but it doesn't matter. think about heelies. a fad i absolutely despise. safety. i jump when it became quickly and you have to get in and get out quickly. it popped into the 30s and began a long, sickening decline that took it as low as a buck and change a few years later. on the other hand, when a company has a good product, profitable, and many ipos aren't, then maybe you can catch both the gains from the initial first aid pop and an extended run afterward. that is very rare. that happened with underarmour, and we knew that the steak matched the siz i'll.
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it popped from 12 to 25, i said hang on. break my rule. hang on from taking profits, some, little, but not also shg all, because underarmour being valued as much as nike. but higher growth rate. pricing that works to your advantage. once in a while you get a thrice blast ipo. profitable entity with lots of room to run, and a great spot, and lulu lemon is a good place. a yoga based apparel company that came public in 2007 and the stock continues to grow, despite the it 008-09 sell-off because the gigantic addressable market. it used to be women that just performed yoga, and now it's all women, and some men too. organic foodmaker, annie's, symbol bunny, b-u-n-y and good
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wire, they all fit the test. they recognize the size of the mark, power of competitors and the value versus similar players, deals which are priced at significant discounts, and you pack factor in long term growth rates, but they are rare indeed. bottom line, to analyze an ipo, including the obtuse technologies, the ones that have those kinds of technologies that we don't really understand, look at the aaddressable market, the competitors, historic growth rate of the company, versus the growth rate of the market it's and see if the company is profitable and see if the broker's pedigree and then and only then you will know whether it's worth it to put in for the deal. "mad money" back after the break. nobody is more passionate about the market than i am. nobody in the whole country. >> i want to thank you. you have saved my retirement. >> you are why i come out here and do this show. thank you so much. >> the stuff that you're doing for all of us, it's so important. i want to say thank you. >> my husband and i watch every
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day, and we count on your help for small investors like us. >> put cramer's 30-plus years of experience to work for you. "mad money," weeknights on cnbc. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated,
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you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. clamp. glitter. [ male announcer ] staples has everything your business needs. even custom banners. and now get 50% off banners and posters. staples. that was easy.
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now, it's time for some tweets and mail from you home
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gamers. first tweet comes fro from @reelsfly. new player to the game. talk about waiting for a pullback. any standard percentage to look for #madtweets, #madmoney. yes, 5% to 8% when i say the market is about to pull back. for individual stocks, if they are on the new high list, you are thinking two to three points for a stock under 50, over 100 has got to be say five to ten points. i'm looking for tighter when it comes to pullback on the stock. for market, it's 5 to 8. another tweet fro from @jimmyjenga17. i wonder if you have any advice for a 20-year-old looking to start early. look around yourself. what are people wearing? what are people buying? where are people shopping? what are people eating? what restaurants are they going
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to? go to the website. it's going to be right there go to the worldwide web and look at the financials. and look at the conference calls, analyst presentations. those are important. look at newspaper articles, google news, get comfortable, because i can tell you the first buy you make, it's going lower, it happens to everybody who is younger. you have the rest of your life to make it up. i have a another tweet. is there a number of stocks you should buy. should you waste your money if you can only buy five shares of a company? absolutely not. that's how i started. and i ended up doing very well. i started out with five, seven, nine. don't be intimidated. i would say to a broker, i would to buy five shares, and was like please don't make fun of me. please take mail. cramer, love the show.
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a company invest in and work for is undergoing a one to one conversion conversi conversion. any impact? it simply doesn't matter. i know it seems wrong, but it seems like a big move, but the market has figured out well ahead of time. all right, stay with cramer. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display
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